TNAG-0623-FCO40-771-Hong-Kong-Government-investments-in-South-African-stocks-1977 — Page 60

COVERING SECRET

Reference.......

Mr Stewart

HONG KONG: INVESTMENT IN SOUTH AFRICAN STOCK

HKK

A

Flags 1.

Mr Smith's minutes of 25 and 26 January refer

102/1 700/3

and B

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FRD

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2. I think that one point to be established is whether the Hong Kong Government's investment in South African stock was already known to HMG before it came to light in the Annual Report of the Director of Accounting Services in Hong Kong. We need to be careful not to over-react to a situation that may have already been known to, for example, the Treasury and have been accepted by them.

I say this because Mr Haddon-Cave told me when I called on him in Hong Kong last summer that the Treasury and the Bank of England were kept informed on a monthly basis, by means of statements supplied ex gratia by the Hong Kong Government, of the value of Hong Kong's sterling holdings. (My minute of 16 July on HKK 100/6).

-

I think that such statements may also give a general picture of the make-up of Hong Kong's reserves and overseas investments. It is also relevant, I think, that the Treasury told us last summer that the Hong Kong Government's management of its sterling holdings left "no cause for reproach" (para. 2 of Mr Barratt's letter of 23 June to Mr Cortazzi). I therefore agree that, subject to the views of CSAD and FRD, it would be a good idea to check whether the Treasury do know about Hong Kong's investment in South African stock.

Dr.F.Mullon

D F MILTON

PREV.

CODE 18 - 77

28 January 1977

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